By 2026, the health, beauty and personal care retail category worldwide would accumulate an additional €259.7bn ($305bn) in sales, driving total category worth to €1.14 trillion ($1.34trn) with just over 50% of this growth coming from e-commerce, according to a report from research and data specialist Edge Retail Insight – part of Edge by Ascential.
The Health, Beauty and Personal Care June 2021 report indicated that by 2026, 26.8% of total global health and beauty sales would come from online shopping and represent €305.2bn ($358.4bn) in sales – up from around 20% in 2021 – meaning health and beauty e-commerce was primed to grow three times faster than store-based over the next five years.
In the EMEA region, health and beauty e-commerce was set to grow at a CAGR of 9.4% between 2021-2026, versus 3% for store-based, and by 2026 e-commerce would account for 18% of total health and beauty chain retail sales across the region. Edge Retail Insight said that in growth terms, online would account for over one-third (36%) of sales growth in health and beauty over the next five years in EMEA.
Last year's Edge Retail Insight had already outlined the rising potential of online health and beauty retail that was set to continue further, driven by continued brand and retail innovation in the wake of COVID-19 – a pandemic that had created a 'pretty big' impact already, according to Florence Wright, senior analyst at Edge by Ascential.
‘A lot of innovation’ from retailers and brands
“We’ve certainly seen a lot of innovation from retailers in this space, particularly in that engagement-discovery stage of the shopper path to purchase,” Wright told CosmeticsDesign-Europe.
“We’re seeing a lot of retailers partnering or investing in digital try-on technologies,” she said, including APAC retail major A.S. Watson, and also lots of beauty brands like international major L’Oréal widely engaging with retailers on such technologies.
“Some of these more general, big box players are looking to the specialists for support to drive that excitement and exclusive assortment,” she said. And for beauty specialists like Sephora and Ulta Beauty, these big retail collaborations provided access to high footfall retail locations and a wider consumer base, she said.
“…Lots of retailers have been open to trying new things,” Wright said – both in-store and online.
Online beauty retail innovation – ‘there’s probably still a way to go’
However, as growth in online health and beauty sales was set to soar, she said more innovation and collaboration in the e-commerce space had to be done.
“I think there’s probably still a way to go, in terms of beauty online, just because it’s such an aesthetic category and it’s really reliant on that in-store discovery and experience. And there’s probably still more that retailers can be doing to make that experience really seamless and enjoyable online as well.”
Whilst many specialist beauty retailers and brands had invested in e-commerce and the broadening of digital ecosystems and revenue streams – Sephora, for example, recently acquired Feelunique and partnered with Zalando – she said much of the online growth in health and beauty was still forecast to come from pureplay digital retailers and largely from the Asia-Pacific region.
By 2026, Alibaba was touted to become the largest e-commerce health, beauty and personal care retailer in the world, followed by Amazon and then JD.com, according to the Edge Retail Insight report.
“You’ve got some of those really large-scale online players like Alibaba and JD.com and they’re just such large-scale retailers that they drive a lot of that scale and growth. Similarly, over here in the EMEA and US region, Amazon is accounting for that,” she said.
“…They’re not necessarily beauty or health specialists, but they are building out their offering here and the sheer scale of them means any growth we see through them will influence that health and beauty landscape.”
Amazon in particular had made its beauty ambitions clear back in 2019 with the launch of its own-brand skin care line Belei and tie-up with L'Oréal to launch Modiface.
So, as online health and beauty built out and in-store retail innovations drew more footfall in, what takeaway message was there for brands and retailers in the category?
Omnichannel innovation, e-commerce upskilling and Amazon tie-ups
“I think the story for all of them, regardless of where they operate and what kind of category they operate in, is to think omnichannel,” Wright said.
“It’s no longer just about focusing on the physical store or even just e-commerce; it’s about trying to create experiences and assortments and offerings which align to both of those channels,” she said.
Investment had to focus on innovations around digital touchpoints in-store and engagements that linked back to consumer apps, but also on “e-commerce upskilling”, she said. Go-to-market approaches and partnerships with pureplay online majors like Amazon should also “be a priority” for beauty brands because of the scale these players now operated at and the amount of growth set to come from them over the next five years, she said.
“Brands in particular, will be looked upon by their retail partners to drive innovation going forward, particularly from a physical store perspective where there’s real need for transformation, like in-store experiences, discovery and omnichannel engagement methods. But then also those opportunities online as well, like digital upskilling and building online capabilities, are really important.”
A beauty retail future? ‘Fewer stores, but better stores’
Asked what beauty retail might look like in 2026, Wright said: “There will be fewer stores, but better stores.”
And beauty success, she said, would pivot on “increased collaboration” between the retailers and the brands. “We’ve certainly seen retailers being more open to collaboration, in terms of shop-in-shops, and if brands and retailers collaborate more that can often end with some really nice, creative and innovative initiatives. Openness to collaboration is really important,” Wright said.